elbowpatches
Active member
Feel free to skip over this post - it contains some accounting that most will find pretty boring!
Is correct - mostly. There are two types of cost: investment in infrastructure (stadium, stadium expansion, training ground as examples) which is "capital" cost, and routine expenditure which recurs every week or month (wages, for example). The former type of cost is classed as an asset on the balance sheet and is written off over a number of years (building costs tend to be written off over 10 or 25 years). Each year, the write-off (called depreciation) comes off the balance sheet and onto the profit and loss account as cost, whereas the full wages cost has to be taken as a cost in the month it is incurred. Thus, the investment in seating would only be taken as a cost for FFP purposes in equal instalments over 10 or 25 years.
Obviously, the cash to build the extra seating will have had to be generated from somewhere (probably originally the loan from TB), but that is different from a "cost" in the P&L account.
An example in our lives is the purchase and running costs of a car. The purchase price of the car would be a capital item that would be depreciated over typically 5 years; petrol, road tax, insurance, repairs etc would be taken as a cost immediately.
Thank you for clearing it up. There is a depreciation charge over a period of time that counts towards then?
Would it be beneficial therefore to start ASAP so the depreciation charge reduces whilst FFP comes in? Or would it have been more prudent financially to have waited?
Personally I would have rather have the Amex 'finished' and the training ground than heavy investment in players. I'm not desperate to go to the Prem yet but it would be great. Especially after that lot up the road went up.